CAN ACCOUNTING BE LEAN?

CAN ACCOUNTING BE LEAN?

Aligning lean strategy with lean accounting for lean manufacturing

organizations in the Netherlands

Master Thesis

MSc Business Administration, Organizational & Management Control

Lenny Meeuwes (Liefke Leentje)

S1773550

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CAN ACCOUNTING BE LEAN?

Aligning lean strategy with lean accounting for lean manufacturing

organizations in the Netherlands

Author:

Lenny Meeuwes

Address:

Oude Ebbingestraat 46

9712 HL Groningen

Telephone number:

06-46663663

E-mail address:

lennymeeuwes@gmail.com

Student number:

1773550

Study:

MSc Business Administration

Specialization:

Organizational and Management Control

First Supervisor:

Dr. H.W.J. Vrolijk

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ACKNOWLEDGEMENTS

Dear reader,

This report is the result of a research performed to finalize my study Organizational & Management Control at the University of Groningen. I started studying at this University in September 2008 and after completing the BSc Business Administration in 2012, I started a Master in Business Administration, specialization Organizational & Management Control. My thesis focuses on the added value of Lean Accounting to lean manufacturing organizations in the Netherlands. Lean manufacturing, Lean Accounting and management accounting systems are topical subjects throughout this study.

The writing of this thesis was only possible by getting the right support. I would therefore like to thank my first supervisor Dr. Hein Vrolijk. Due to our cooperation and his useful feedback this thesis became what it is now, a thesis I am proud of. I enjoyed the conversations we had and the cappuccino and cakes he came up with during several meetings. I would also like to thank my second supervisor, Drs. Marcel Bergervoet, for co-reading my thesis. Moreover, I want to thank the interviewees of MSE Forks and Landustrie for their collaboration and their openness about the subject in their organization. Finally, I want to thank my family and friends for their support, motivation but also distraction during the writing process. Thanks Fabienne, Roxy, Rashree and Priya for the relaxing moments and coffee breaks at the UB. I especially want to thank Joris, for always being there for me, for your endless support and trust in my possibilities. Thank you all.

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ABSTRACT

Adoption of lean manufacturing tools has become widespread in many manufacturing organizations since the early 1990’s. While organizations change their manufacturing processes, it tends they suffer aligning their new way of manufacturing with a corresponding management accounting system (MAS). As a result, organizations take decisions that impede for optimal results. The primary objective of this research is to find out to what extent Lean Accounting enhances the value of lean manufacturing organizations’ lean strategy. By investigating what Lean Accounting actually is, what the shortcomings of a traditional MAS are and the added value Lean Accounting provides organizations with, the research question is answered.

By investigating literature on lean and by providing two case studies, this research found a supportive accounting system an essential element for the success of a lean strategy. While most performance indicators used by the organizations surveyed support lean manufacturing, structure is lacking. To create an overview of all relevant elements in order to measure performance and base operational- and strategic decisions on, elements of Lean Accounting are found to be helpful. Visual Management is confirmed as an important aspect of Lean Accounting, and by introducing Box Scores to organizations, this will help organizations to achieve their goals. In addition, the forecasting of sales on a monthly basis is also found supportive to the lean strategy. Other findings supporting the lean strategy are supply chain management and support of the workforce.

Keywords: lean philosophy, lean thinking, lean manufacturing, Lean Accounting, management

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Table of Contents

1. INTRODUCTION ... 7

2. LITERATURE REVIEW ... 10

2.1 Lean philosophy: lean strategy, lean manufacturing and Lean Accounting ... 10

2.2 Lean Manufacturing ... 12

2.3 Drawbacks of the traditional management accounting and control systems ... 14

2.4 What is Lean Accounting? ... 16

2.4.1 Visual Management ... 18

2.4.2 Value Stream Management ... 20

2.4.3 Continuous Improvement ... 22

2.5 Conclusion literature review ... 23

3. RESEARCH DESIGN ... 25

3.1 Type of research ... 25

3.2. Selection of case organizations ... 25

3.3 Data collection ... 27

3.4 Question details ... 27

4. CASE DESCRIPTION AND ANALYSIS ... 29

4.1 MSE Forks ... 29

4.1.1 General information ... 29

4.1.2 Operations ... 29

4.1.2.1 Changes in operations and encountered obstacles ... 30

4.1.2.2 Measuring of operational KPI’s ... 32

4.1.2.3 Operational and strategic decisions ... 33

4.1.3 Internal Reporting ... 34

4.2 Landustrie ... 36

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4.2.2 Operations ... 36

4.2.2.1 Changes in operations and encountered obstacles ... 36

4.2.2.2 Measuring of operational KPI’s ... 37

4.2.2.3 Operational and strategic decisions ... 39

4.2.3 Internal Reporting ... 39

4.3 Overview case descriptions ... 41

5. CONCLUSION, RECOMMENDATIONS, LIMITATIONS & FUTURE RESEARCH . 44 5.1 Conclusion ... 44

5.2 Recommendations for MSE Forks and Landustrie ... 47

5.3 Limitations ... 48

5.4 Suggestions for future research ... 49

REFERENCES ... 51

APPENDICES ... 56

Appendix 1: Overview research question and sub questions ... 56

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1. INTRODUCTION

“Measurement is the first step that leads to control and eventually to improvement. If you can’t measure something, you can’t understand it. If you can’t understand it, you can’t control it. If you can’t control it, you can’t improve it.” (H. J. Harrington, 1991)

Global competition has prompted companies to compete on the basis of quality, flexibility and timeliness (Kalangnanam & Lindsay, 1998). Manufacturing companies have responded by changing their operating strategy to focus on lean manufacturing. Lean manufacturing techniques such as Total Quality Management, Just-In-Time, and total preventative maintenance are used by companies to stay in the market (Shah & Ward, 2003; Kennedy & Widener, 2008). The relevance to management accounting is that many argue that lean manufacturing necessitates changes in accounting practices, control, and measurement systems (Fullerton & McWatters, 2002; Maskell & Baggaley, 2004). As companies progress in their implementation of lean manufacturing, organizations often recognize the need for a supportive management accounting and control system (Fullerton, Kennedy & Widener, 2013). Yet, accounting research and knowledge have been slow to recognize the importance of aligning management accounting and control practices with a lean manufacturing strategy (Castellano & Burrows, 2011).

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traditional way of using fixed budgets tends to be too costly, time-consuming and susceptible to fraud that this method does not function appropriately anymore. For example, at the end of a budgeting period, it happens that managers distort the truth by spending the complete budget while they did not need the whole budget. Managers do this in order to make sure they do not get a reduced amount of money for the next period of time. Although budgeting can be seen as an important control technique for most organizations, Neely, Bourne and Adams (2004) claim that 80% of the businesses are unhappy with their planning and budgeting processes, mainly because the traditional budgeting system is costly and time consuming (Wallander, 1999). Implementation of a lean strategy in a business receives increasing attention as a way to make organizations more profitable. A lean strategy in an organization works best when this results in a lean manufacturing and a supportive accounting part. While lean manufacturing focuses on adding value to the product, eliminating waste and producing only to customer demand, Lean Accounting focuses on changing the reporting and control process to gain more insights in the results gained from lean manufacturing.

To prevent misunderstandings, the terminology of accounting in English might cause confusion compared to the Dutch terms. Accounting in Dutch generally means the work of auditors, with the usage of numbers to interpret results. When discussing Lean Accounting, next to the work of auditors, also the job content of controllers is included. Lean accounting and control practices are defined as “a new method of managing a business that is built upon lean principles and lean methods” (Maskell & Baggaley, 2004). Although it is well-accepted that accounting and control practices are related and work as a ‘‘package’’, (Otley, 1980), information on what constitutes the package used to support a lean manufacturing strategy is lacking. Maskell and Kennedy (2007) conducted research on different lean accounting and control principles to enhance a framework and to broaden the state of knowledge in this area. Although there are Lean Accounting practices available, most organizations fail aligning their strategy with accounting. Therefore, it can be stated that there is a need for research in this area: can accounting be lean?

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Bhimani, Horngren and Rajan (2012), emphasized on budgeting and allocation of indirect costs by using for example Activity-Based Costing (ABC). Beyond Budgeting is the only alternative that is discussed briefly, while Lean Accounting is not even mentioned by that, or other courses. From this point, it can be assumed that management accounting tools supportive to lean manufacturing are not yet part of traditional education. Because lean is a popular concept adopted widely by organizations in several fields, knowledge of a corresponding MAS is necessary to support companies and their way of working.

According to academic research the following academic and business problem can be detected: lean production does not maximize value in organizations due to a lack of clarity about a suitable MAS for lean manufacturing organizations.

As a result the following research question is addressed: “To what extent can lean

manufacturing organizations increase the value of the lean strategy by using Lean Accounting?”

The research question is further divided into three subparts. The first sub question examines what Lean Accounting actually is. After that, the problems according to accounting and controlling in lean manufacturing organizations are investigated followed by the way they cope with these problems. Finally, the added value of Lean Accounting to lean manufacturing organizations is addressed. Appendix 1 provides an overview of the research questions and the corresponding sub questions.

Data of two manufacturing organizations who arranged their production processes according to the lean concept is used. Meijer Special Equipment (MSE Forks) and Landustrie are selected and a case description of these organizations is provided. The data of the case descriptions is collected by interviewing employees of the organizations who are connected to and are responsible for the reporting and control of the organization.

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2. LITERATURE REVIEW

In this chapter a theoretical framework will be sketched, shaping the theoretical foundation for the empirical research. First, the lean philosophy will be discussed, followed by the concept of lean manufacturing. In addition, the shortcomings of the traditional management accounting systems will be presented. The fourth paragraph discusses Lean Accounting as an alternative to traditional management accounting and this theoretical background will end with an examination of the Lean Accounting techniques developed by Maskell and Kennedy (2007). 2.1 Lean philosophy: lean strategy, lean manufacturing and Lean Accounting

Grasso (2005, p.19) defined the essence of the lean philosophy as follows:

“All business processes and functions need to be integrated into a unified, coherent system whose single purpose is to continue to provide better value to customers.”

According to Womack, Jones and Roos (1990) lean is a philosophy trying to achieve improvements in most economical ways with a special focus on reducing waste in an organization. Motwani (2003) considers responsiveness to change and waste minimization as the basic principles of lean. Others characterize lean as an intellectual approach consisting of several techniques which, when brought together, have the potential to bring about a particularly competitive state in a company (Warnecke & Hüser, 1995). Wood (2004) views lean as giving people at all levels of an organization the skills and shared means of thinking, to systematically drive out waste by designing better ways of working, improving connections and easing flows within supply chains. According to Kroll (2004), lean manufacturing requires a company to move from a functional division of work to work cells where all processes needed to manufacture a product or line occur next to each other in sequence.

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shorter throughput time of the production process together with realizing customer values (e.g. Grasso, 2005; Shah & Ward, 2003; Womack & Jones, 1996). Stated otherwise, lean means creating more value for customers with fewer resources.

The philosophy of lean is found by Toyota Motor Company (Ohno, 1988). The manufacturing processes of Toyota were characterized by the principles of Just-In-Time (JIT) management, and by using this way of stock approach (low amount of raw materials, work-in-process (WIP) and finished goods) Toyota created a competitive advantage. Optimizing JIT resulted not only in a low stock management approach, but created a whole new system of conducting business, which was called the Toyota Production System. Toyota Motor Company adjusted the way of conducting business with the way of manufacturing. The lean strategy of Toyota was reflected by a constant focus on eliminating waste together with a constant focus on process development to enhance value. To minimize waste it is important to clearly understand and define non-value added activities in the product development processes (Ohno, 1988; Liker, 2004). With this approach Toyota distinguished themselves from other organizations. Earlier research found a positive relation between JIT and the financial performances of an organization (Callen et al., 2000; Kinney & Wempe, 2002). Although the lean philosophy originates from the automobile industry, this philosophy is also widely applied in other industries, such as the process industry (Abdulmalek & Rajgopal, 2007), aerospace industry (Ehret & Cooke, 2010), furniture manufacturing industry (Hunter et al., 2004), textile industry (Ferdousi & Ahmed, 2010), and the service industries (Liker & Morgan, 2006).

Manufacturing organizations have responded to the highly competitive market of the past two decades by implementing practices such as Quality Circles, Statistical Process Control, Theory of Constraints, JIT inventory management, Total Quality Management (TQM), Six Sigma, and Total Preventive Maintenance. These are defined as lean manufacturing techniques. Producing according to the lean philosophy can be seen as the new way of conducting business. Lean manufacturing nowadays is often regarded as one of the most important strategies for manufacturing firms desiring to achieve world-class performance (Rinehart, Huxley & Robertson, 1997).

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called lean thinking (Fullerton & McWatters, 2002). To clarify the relations between the lean concepts more, figure 1 is build upon the literature.

Figure 1: Consistency between lean philosophy, lean strategy, lean manufacturing and lean accounting

2.2 Lean Manufacturing

Womack and Jones (1996) came up with five basic principles, summarizing the essence of lean manufacturing and which are essential to let lean manufacturing lead to optimal results:

1) Correctly specify and enhance value;

2) Identify the value stream for each product and remove wasted actions (muda); 3) Make the product flow without interruptions;

4) Let the customer pull value from the producer; 5) Pursue perfection.

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emphasis of performance indicators on a low stock approach, on-time-delivery and a focus on first-time-through (Goldratt, 1984). First-time-through measures the amount of goods produced correctly without flaws or re-work and therefore measures production efficiency, ability or skill, and quality. Tools available to improve the performance indicators are for example continuous improvement/Kaizen; cellular manufacturing; KANBAN; single piece flow needs to be in operation; process mapping exercise is required; single minute exchange of dies (SMED); step change; supplier development; supplier base reduction; 5S (sorting, set in order, systematic cleaning, standardizing and sustaining of work space) and general visual maintenance; total productive maintenance; value and the seven wastes mentioned earlier. The tools enhancing lean manufacturing can only be effective if multiple tools are used instead of embracing one or two isolated tools (Womack & Jones, 1996).

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2.3 Drawbacks of the traditional management accounting and control systems

The first paragraph already concluded there is not one lean formula available that can be implemented in an organization and will lead to optimal results. The basic lean thinking principles composed by Womack and Jones (1996) work best when they are implemented in every section of the organization and therefore also in the MAS.

Traditional accounting and control methods were once designed to support traditional manufacturing; they are based upon mass production thinking. Since lean manufacturing breaks the rules of mass production, the traditional accounting and control methods are less suitable and usually actively hostile to the lean changes the company is making (Maskell, 2011). Anthony, Dearden and Bedford (1989) claimed that management accounting forms the basis of management control with the purpose of motivating and inspiring the workforce to perform in the best possible way. When management accounting and control systems provide management with wrong information, this causes problems to achieve corporate objectives. According to this information it can be said that management accounting and control needs to be aligned with the way of doing business.

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Otley (1980) found that accounting information is often ignored, sometimes manipulated, and even falsified by those to whom it is provided to make results look better than they actually are. As a result of the counter productivity of traditional accounting and control several currents arose. A trend against the traditional way of controlling is the ‘Beyond Budgeting’ theory which originates from 1970 (De Waal, 2002). The main idea behind Beyond Budgeting is to abandon budgetary contracts and the ex-ante performance targets that go along with them (Østergren & Stensaker, 2011). As an alternative, they suggest organizations to use principles like benchmarking and other forms of relative performance evaluation, the replacement of annual plans by rolling forecasts and decentralization of decision-making (Hope & Fraser, 2003). The Svenska Handelsbanken, a Swedish retail bank, is an early pioneer and user of the Beyond Budgeting management concept and gains a lot of success with this concept for over years by targeting for example on internal benchmarking (Lindsay & Libby, 2007). De Waal (2002) questions the applicability of Beyond Budgeting in different types of industries. He claims the use of dynamic standards set relative to competitors in dynamic industries as attractive. The reason for this fit are performances fluctuating from time to time, causing static norms to be outdated in no time. However, steady industries can make use of budgets to exert control over performances. Standards for example can be fixed for over a year without the occurrence of dramatic changes in the industry. Libby and Lindsay (2007) found that respondents overwhelmingly indicated that they could not manage without budgets. Also, people and organizations tend to be risk averse and a lot of the challenges new management control systems face, are not clearly defined yet (Østergren & Stensaker, 2011). Relative few organizations fully abandoned traditional budgeting. Also, research indicates a lack of empirical evidence as a major reason of still using traditional budgets (e.g. Gupta & Govindarajan 1984; Bushman et al., 1996).

While the philosophy of Beyond Budgeting is not adopted by many organizations, there are also other tools available that can be implemented in order to support lean management (Simpson & Greenfield, 2012). Lean Accounting for example also focuses on eliminating waste, breaks with traditional accounting and control but relies on less rigorous thoughts than Beyond Budgeting does.

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are shown. The performance indicators of Lean Accounting are explained in more detail in chapter 2.4.

Figure 2: Main differences in focus between traditional MAS and Lean Accounting 2.4 What is Lean Accounting?

According to Kennedy and Widener (2008), Lean Accounting is a new way of managing a business when that business operates according to lean principles and resources. Maskell (2004) views Lean Accounting as a general term used for changes required to a company’s accounting, control, measurement, and management processes to support lean manufacturing and lean thinking. These may include organizing costs by value stream, changing inventory valuation techniques and modifying financial statements to include non-financial information (Kroll, 2004). In order to summarize literature on this subject, no concrete and comprehensive Lean Accounting tools to implement this MAS are found and therefore it can be suggested that Lean Accounting nowadays is still a vaguer concept than lean manufacturing is. It can be assumed that this is a result of the fact there is done little research on Lean Accounting compared to lean manufacturing.

Despite Maskell (2004) categorizing both accounting and control as parts of Lean Accounting, it might be of importance mentioning that some authors distinguish between accounting and control systems, while others use them interchangeably. Kennedy and Widener (2008) believe that management accounting and control practices work together as a package in a lean manufacturing environment. In order to specify the difference between accounting and control,

Traditional MAS Lean Accounting

Performance measurement Efficiency ratios individual processes

Throughput time and on-time-delivery

Narrow department view Value stream and customer focus

Based on minimizing individual product costs

Based on maximizing value stream throughput

Decision-making Standard costs Value streams costs Cost allocation Allocation of indirect costs

by for example ABC

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Kennedy and Widener (2008) for example viewed the use of a standard cost system to process daily activities as an accounting practice, while they viewed the use of key variances in a performance measurement system as part of the control system. When talking about Lean Accounting, this research uses the definition provided by Maskell (2004), including a company’s accounting, control, measurement and management processes to support lean manufacturing. This research builds upon both accounting and control, since they are found to be co-operating instead of competing with each other.

Authors agree that Lean Accounting is build upon the same principles as lean manufacturing is. Maskell and Baggaley (2003) viewed Lean Accounting as supportive to the lean strategy by:

1) mainly providing accurate information to motivate lean transformation throughout the organization;

2) use lean tools for internal control to eliminate waste from the accounting processes while maintaining thorough financial control;

3) fully comply with GAAP (Generally Accepted Accounting Principles) and other external reporting requirements;

4) support the lean culture by motivating investment in people.

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concrete concepts designed to better reflect the financial performance of a company that has implemented lean manufacturing processes. To me, the author of this research paper, the tools mentioned by Maskell and Kennedy (2007) are not yet concrete tools and can be interpreted and translated into a company in many different ways as will be explained in the next subsections. The model of Maskell and Kennedy (2007) is more concrete and clear than other authors’ ways of practicing Lean Accounting. Therefore, their model is used to build upon in this research. In the upcoming subparagraphs the three aspects developed by Maskell and Kennedy (2007) are discussed.

Figure 3: Primary Methods of Lean Accounting (Maskell & Kennedy, 2007, p.66).

2.4.1 Visual Management

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principles. Box Score formats are used by Lean Accounting to summarize performance. A Box Score format is a one-sheet summary for a value stream showing the operational- and financial performances and how well the available capacity of the value stream is used (Maskell, 2004). Next, two formats with examples of different Box Scores are presented.

Week 1 Week 2 Week 3 Week 4 … Goal

Operational Units per person 20 21 25

On-Time-Delivery 90% 92% 100% Dock-to-dock days1 6.0 6.0 5.5 First-time-through 82% 81% 90% Average Cost €230 €234 €220 Capacity Productive 30% 37% 40% Non-Productive 25% 30% 33% Available 45% 33% 27% Financial Revenue €471 €480 €520 Material Cost €123 €160 €130 Conversion Cost2 €169 € 168 €40

Value Stream Gross Profit3 €179 €152 €230 Return On Sales4 38% 31.67% 44.23%

Figure 4: Example Box Score for Weekly Performance Reporting (Source: Maskell & Kennedy, 2007, p. 68) The in figure 4 shown Box Score format can be used for weekly performance reporting. All indicators used are easy to measure and by setting a goal on the right-hand sight of the matrix desirable performance is made clear to stimulate better performance. Box Score formats can also be used to investigate (un)profitability from outsourcing activities by comparing profit from in- and off shoring decisions. The Box Score format of figure 5 provides insights in the benefit from strategic decisions. By removing low margin products and introducing new products financial benefits become visible. Indicators are just like the other Box Scores easy to measure. The information achieved from the Box Scores can be used concerning investment decisions and provides insights in the profitability of the organization.

1 _{Dock-to-dock days is the throughput time in days from raw material to delivery to customers}

2 _{Conversion costs are defined as all value stream costs except materials and purchased outside services}

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Value Stream Gross Profit can be calculated by subtracting material cost and conversion costs from revenue gained

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Figure 5: Example of a Box Score Showing Strategic Decisions (Source: Maskell, 2004, p.8).

As the company moves from the current state to a state where low margin products are removed, units per person will decline, average product cost will increase and value stream profit declines. Every controller would agree this is not an attractive state. However, when the company introduces new products with higher margins, units per person will increase, just like the revenue earned and the value stream gross profit. By removing low margin products and introducing new products, financial improvements will be made compared to the current value stream. This example demonstrates that Box Scores can be used to investigate the impact of strategic decisions. They unlock the financial potential of lean for a company. By using the simple, yet powerful information provided by the Box Scores, there is no need to use standard cost accounting for aforementioned important decisions. Additionally, Box Scores make it easier for non-financial people to understand the economics of lean.

2.4.2 Value Stream Management

Lean Accounting uses Value Stream Costing (VSC) instead of standard cost accounting to better capture a company’s results and requires changes to decision-making processes (Woehrle & Abou-Shady, 2010). Value includes everything done to add something for a customer that can be associated with a product or a product line by the company (Kroll, 2004). A value stream is the flow of all activities required to transform raw materials into a product or service for customer use (Fullerton et al., 2013). A value stream includes all of the functions and

5 _{AR days are the accounts receivable days outstanding. Calculated by 365/accounts receivable turnover}

Current Value Stream Jan 2013 Remove “Low Margin” Products Jun 2013 Introduce New Products Sep 2013 Operational Units per person 466 395 505

On-time-shipment 92% 99% 99%

Dock-to-dock days 15 7 9

First-time-through 65 75 75

Average product cost €112.75 €120.94 €109.23

AR days5 42 35 35

Capacity Productive 24% 18% 28%

Non-productive 63% 35% 42%

Available 13% 47% 30%

Financial Revenue Monthly €10,667 €9,866 €12,800 Material Cost €3,758 €3,185 €4,073 Conversion Costs €2,547 €2,547 €2,547 Value Stream Gross

Profit

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people required to fully support the operations of the value stream. This method focuses on the cost structure and contributes to transparency and clarity of the capacity within a value stream. For example, an order fulfillment value stream goes from the front end (sales) through manufacturing and after-sales support (Brosnahan, 2008). The value stream consists of expenses a company incurs to design, engineer, sell, market and ship a product as well as the costs related to servicing the customer, purchasing materials and collecting payments on product sales. Figure 6 shows an example of a value stream.

Figure 6: Costs included in Value Stream Costing (Maskell & Baggaley, 2003, p.25)

By using value streams, bottlenecks can be detected quickly. Bottlenecks provide for the relatively more expensive production of one product compared to another as a result of dependency on bottleneck processes. This results in measuring the “rate of flow” through the production process as being an important performance indicator related to bottleneck detection (Baggaley, 2003). The most important distinction with standard cost accounting is that value streams cut across functional departments and therefore one stream can include sales and marketing, but also production, design and cash collection costs. VSC can be seen as a new way of looking at costs (Kroll, 2004). Lean Accounting advises accountants to trace only direct costs to activities (Johnson, 2007). Maskell (2004) earlier found that by using value streams, there is little or no allocation of overhead needed:

“It’s a matter of gathering revenue and expenses for the value stream to produce an income statement. While corporate overhead costs are accounted for, they are shown below the line on internal value stream reports. The reason? Employees working in the value stream can’t control them.” (Maskell, 2004, p. 86)

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motivation according to lean improvement across the entire value stream, and clear accountability for cost and profitability. To improve control Maskell and Kennedy (2007) found that the best results are achieved when weekly reporting takes place. Brosnahan (2008) is a controller and implemented value stream management in the organization she works for. She confirmed that weekly reporting leads to optimal results as a result of practical experiences. In addition, she found VSC resulting in better communication, coordination, reduced inventory and improved decision making.

“Value Stream Management has helped each employee to better understand the key drivers or metrics that make a difference in our business and how they contribute to the company’s success by helping move those metrics in the right direction.” (Brosnahan, 2008, p.61)

2.4.3 Continuous Improvement

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employees (Maskell, 2004). According to Maskell, Baggaley and Grasso (2011) SOFP leads to better decisions, better communication, faster processes and empowerment of the value stream people.

2.5 Conclusion literature review

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3. RESEARCH DESIGN

In this study the extent to what Lean Accounting can enhance the value of the lean strategy by supporting lean manufacturing, is investigated. This section will explain how the formulated sub questions in order to answer the research question will be researched. The first sub question “What is Lean Accounting”, is answered by analyzing literature. In order to answer the other sub questions, “What are common problems according to accounting and controlling in lean manufacturing organizations and how do organizations cope with these problems?” and “What is the added value of Lean Accounting to lean manufacturing organizations?” empirical evidence is needed to extend literature. By answering the sub questions, the research question “To what extent can lean manufacturing organizations increase the value of the lean strategy by using Lean Accounting?” can be answered.

3.1 Type of research

Research can be divided in quantitative and qualitative research. Quantitative research focuses on numbers and figures, while qualitative research puts emphasis on words and sentences. Next to being interpretive, qualitative research explores new or unknown phenomena, which leads to new theory and knowledge (Erickson, 1986). An important difference with quantitative research is that this research is descriptive, not explanatory. In a future state, findings of qualitative research can be tested by doing quantitative research. The research at hand investigates a relatively new phenomenon and due to in-depth case studies this study can be classified as a qualitative study. In addition, this research can also be considered as an exploratory research. Within such a study, one or more case studies are conducted. According to Stake (1994), a case study is a choice of object to be studied. It is among others. He explains that case studies are of value in refining theory and suggesting complexities for further investigation.

3.2. Selection of case organizations

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manageable number and gives the opportunity to compare, research and describe the use of lean manufacturing and reporting properly.

The organizations are selected on the basis of the following criteria:

- The organization needs to be located in the discrete manufacturing industry with B2B (Business-to-Business) transactions instead of B2C (Business-to-Consumer) transactions. This is important because organizations operating in a concrete business manufacture products through a series of sequential steps. As a result, this type of organizations probably reflects the concept of lean well: several sources of waste can be identified. In addition, it is of importance to not measure different industries, because they might have different ways of working. Also, the concepts tested in this research (e.g. throughput time and first-time-through) can be compared better when organizations operate in the same type of industry and have similar types of customers.

- The organization has to be actively involved in the process of lean manufacturing for at least two years. Because literature found a delay of changing accounting systems after implementing lean manufacturing tools, it is important that case organizations are familiar with the lean tools for over two years, so chances are best they already changed their MAS.

- The organization needs to have at least 30 FTE and a turnover of at least €5 million per year, to be an organization of a reasonable size and to make sure every employee has clear job responsibilities.

Both of the participating organizations are a member of the Lean Innovation Network (LIN) and are located in the northern part of the Netherlands. The LIN is a network of reputable large and small companies who all have a passion for continuous improvement and acceleration of innovation. As a result, participating companies have the drive to deliver high value in a way as efficient as possible, principles that fit the lean perspective.

Case 1: MSE Forks, a manufacturer of telescopic forks.

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3.3 Data collection

In-depth interviews are used to provide an answer to the research question of this study. The issues are all transformed in interview questions, which are attached and can be found in appendix 2. Interviews are semi-structured, this means that the interview questions are used as a guideline for the interviews. This type of interviewing is chosen so interviewees have the possibility to come up with additional information. As a result, data from the interviews is structured by subject, giving the possibility to analyze the obtained information well. To make sure the data gathered is processed in a right way, the results part (chapter 4.1 and 4.2) is send back to the organizations for confirmation.

3.4 Question details

The question-list is used to collect information in order to answer the research question of this Master’s thesis. The question-list is subdivided in four sections.

First, three general questions are asked to get more understanding of the position of the interviewee.

Second, perceptions concerning the current way of conducting business are investigated. This part mainly focuses on lean manufacturing. Question 4 and 5 discuss the introduction of lean and its purpose to the company. Question 6-8 examine the content of lean manufacturing, started by the change of five operational performance indicators, all found of importance to the lean philosophy by the literature review. Next, interviewees are asked on which basis decisions are made.

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4. CASE DESCRIPTION AND ANALYSIS

This chapter contains the findings of empirical research conducted at MSE Forks and Landustrie. This chapter is divided into three subsections. Section one and two present the findings of the interviews at both organizations separately and section three discusses the main similarities and differences of the organizations by comparing them with each other and with literature. To support this, an overview of the main findings of both cases is presented in an organized format. Findings from MSE Forks are discussed first, followed by Landustrie. Because both operate in the discrete manufacturing industry, are located in the same part of the Netherlands and their customer base consists of business customers, they can be properly compared with each other. It is of importance to mention MSE Forks has immersed oneself earlier (5 years ago) into the philosophy of lean than Landustrie did (2 years ago) and as a result, MSE Forks has more experience with the lean philosophy.

4.1 MSE Forks

4.1.1 General information

MSE Forks (Meijer Special Equipment) is a Dutch organization producing telescopic forks, located in Sint Jacobiparochie. The organization consists of about 40 FTE and faces a turnover of €10,5 million annually. MSE Forks is founder of hydraulic lift truck forks, traded as Kooi-Reachforks, and since its introduction in 1980 they are world’s biggest producer of this product. The hydraulic forks are used for double-deep stacking, one sided loading of trucks and trains, dual load transport, and as extensions when a variety of different pallet sizes are used. Of the manufactured forks, 95% is traded as export. Two employees are interviewed: the managing director/founder of the organization, and the head office management/purchaser of MSE Forks.

4.1.2 Operations

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“To us lean is a tool to achieve our goals. We know what we want, what we’re good at and where we want to be in a couple of years. Lean helps us to get there. However, it is for example not our purpose to become as lean as possible.”

4.1.2.1 Changes in operations and encountered obstacles

At first, they removed the buffers of inventory. Most materials needed by the operating processes to manufacture products are ordered now by KANBAN and therefore almost every piece in the organization is identifiable. Only a few parts are not included in the KANBAN process, because of a long delivery time. MSE Forks uses KANBAN as a two-bin system to signal the need for supply. Every day one person does the so-called ‘milkrun’, which means this person goes by every workstation to collect empty trays. He takes the trays to the expedition and scans them. By scanning the empty trays an order advice is send to the office immediately, where the order is confirmed. The order advice takes the delivery time and an extra buffer into account to prevent from shortages. Since they started working with KANBAN, MSE Forks has drastically lowered their stock of raw materials. In the past, every employee went to the warehouse by himself to collect the parts needed. By now employees no longer have to leave their workstations.

A disadvantage of removing the buffers were the disturbances that came to light. In the past only one position stopped when an error occurred, but by now ten people cannot continue their work if a fault arises somewhere in the production line. In the beginning this resulted in a lower reliability of supplies. By solving all problems one by one and introducing spare parts, reliability rose again. In addition, they introduced preventive maintenance like replacing pumps to avoid corrective maintenance when operation stops two times a year: around Christmas and during summer holidays (in Dutch called ‘bouwvak’).

Another problem that arose by removing the buffers were the different durations of processes, in Dutch called ‘takttijden’6

. When step A is completed earlier than step B is, the responsible employee waits until the ‘takttijd’ is passed by until he starts working on the next product scheduled. MSE Forks started investing in machinery with the purpose to equal different ‘takttijden’ by buying an extra machine, changing the settings of the machine or changing the

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process. While alignment of ‘takttijden’ might succeed for 90%, they think a 100% alignment will not be possible as a result of bottlenecks. By investing in a bottleneck process to increase flow, another bottleneck will immediately arise. As a consequence, the occupancy of some processes is never fully used. However, while the occupancy rate decreased, the flow increased. The workforce was having a hard time understanding they were doing the right thing by not processing available stock. Instead of waiting, employees are taught to help their colleagues to create flexibility and flow. This means that those who work at work station B, also need to be employable at A and C. Cooperation from every employee is needed to let this work. In the past, MSE Forks faced some employees who were not willing to work according to the new guidelines. If someone did not support the process, they immediately saw a decrease of output. This person unfolds as a bottleneck because he does not ‘pull’ the process. Therefore, understanding and acceptance of lean thinking are necessary to create support of the workforce. To gain this, the managing director offered training to the workforce. They for example played a game to mimic a lean manufacturing plant and everyone got a role assigned in the production process. LEGO bricks were used as the materials needed to fabricate products. By playing this game, the concepts of for example bottlenecks and waiting time are made understandable. MSE Forks encountered more difficulties with the older workers than the younger ones to understand and accept the new way of working.

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daily deliveries cut costs by 50%, resulting in annual savings of €100.000. So here, MSE Forks chose to not follow the lean principles according to inventory due to financial reasons.

Since the implementation of lean tools they hardly work in overtime, while they faced a lot of overtime in the past. Next to a calm and peaceful work environment, this also cut costs because overtime is rewarded with 150% of normal wages. As a result, employee involvement increased. Employees can come up with ideas to help improve the organization. Two times a year the best ideas of improvement are rewarded with prizes to stimulate thinking along. This is an element of their ‘continuous improvement’ program. Also, the status of ongoing improvements is shared with the workforce, so they can see how their ideas are put into practice.

4.1.2.2 Measuring of operational KPI’s

Once a month the key performance indicators (KPI’s) are discussed with all staff: operating- and administrative employees together. This meeting takes approximately 45 minutes and the most important results of the last month (in comparison to other past periods) are discussed. Recently, they also started looking at daily production, supported by information provided by planning. However, they do not capture daily information yet. The most important performance indicators (PI’s) for operating staff according to the managing director are those they can influence. Not all financial PI’s are discussed with operating staff, because they cannot influence all of them. After-sales is an example of a KPI discussed with all employees. In the past they only counted claims that came in, but to give this indicator more body they now also share the charges entailed with all employees. By sharing information concerning this PI with operating staff, they create awareness of the mistakes made. As a result, operating staff maybe can change something in the production process which lowers after-sales costs.

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By setting ‘waiting time’, change-over times are covered. At the start, waiting time consisted of 30 minutes, by now it is reduced to 10 minutes. Overall, the biggest improvements were made when they removed the buffers (raw materials, WIP and finished goods) at the start of lean. By now, small improvements are made in order to optimize the system. They call these enhancement plans ‘continuous improvement’.

Besides after-sales, on-time-delivery and average production time, also sales per capita per hour, production of different products per year, processing time of different products, turnover compared to last year of different products and internal failures of different products are measured as performance indicators. When an internal failure occurs, most of the time a new product needs to enter the product line. In the past, the responsible employee went to the first person in line to set a new fork, but by now the new fork first needs to be scheduled by the planning system. By doing this, it is possible to better count the mistakes that have been made. Also, lists with information concerning the desired behavior of employer and employee and the seven sources of waste (muda) are visibly shown to the workforce by printing them and showing them in the plant. In addition, management transformed the principles of lean in a sailboat and a painting of this sailboat is presented in the plant. The purpose of this sailboat is to clarify the vision of lean by a drawing. The body of the boat is the basis: stability and financial health are essential next to a vision (compass) to guide the organization in order to achieve its goals. The sailcloth of the boat represents the tools needed to achieve their goals. To them these tools are 5S, Pull, Turn (will be explained in section 4.1.3), Flow, SMED and KANBAN. By combining these tools with Quality, Price, Market Support and Delivery Performance they want to satisfy their customers.

4.1.2.3 Operational and strategic decisions

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4.1.3 Internal Reporting

According to internal reporting, they do not use Lean Accounting theory to shape their accounting systems. They said they understood lean at one point in time and started to set all processes according that philosophy. When they face a problem, they capture it in a ‘quality manual’ and try to solve it. As a result, they not only implemented lean tools in the operating processes, but also adjusted ways of reporting. Examples of these are the operating KPI’s mentioned above. Another example of changes in reporting is the introduction of PCF (Product Configurator). When MSE Forks receives an order, the planner sends a confirmation to the customer. At the same time, a production card is made with an order advice. One person sets the whole process to manage production. The purpose of PCF is to manage fast confirmation of the order to the customer and starting the production process intern at a time. Next to PCF they changed the registration of hours. They measure the lead time of an order, not the duration of one process by one employee. Management only wants to collect data they actually use.

To support and control the flow of the production process, MSE Forks invested in a planning system called LPC (Lean Production Control). LPC is a visual system developed by people in the field. Every workplace has a monitor that provides insights in the flow. Employees for example can see if they operate according to schedule, ahead or behind. When an employee starts and finishes an operation, he scans a label in order to gain insights in the throughput time. As a result of the insights in the production flow and processing time, the chief can grip an order and move the different parts through the processes. LPC allows you to slide the different forks in such a way that the processing times fit best. By doing this, you can deal in the best possible way with bottleneck processes. LPC can be compared with the tile-machine puzzle Tetris, you will achieve best results when you constantly create horizontal lines of ten blocks without gaps: when employees don’t stick to the planning provided by LPC, they immediately face a lower flow and as a result also a lower output. Therefore, management prefers an employee to wait or help a colleague, instead of continuing working on stock if it’s not yet time for this stock to be processed according to LPC. To enhance on-time-delivery, LPC schedules 1,5 day for packaging (last process step before delivery) although this only takes about 10 minutes.

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management is the ‘turnover per capita per hour’. With this measure, they take all employees into account, regardless if they are direct or indirect staff. An advantage of this measure to the management is the speed of announcement. At the first day of the next month this information can already be provided. Next, they also have a few performance indicators they only report to management. One of them is the so-called ‘turn’:

Turn = (Turnover / Stock) + Stock

Stock comprises of all materials, WIP and finished goods present at the organization at one point in time. By examining the ‘turn’ they benchmark their company and their separate products. For example, when the turnover of period 1 is 100 and stock is 15 (dividend into 5 WIP and 10 finished goods), turn is 21.67 (= (100/15) + 15). When the turnover of period 2 will be 105 and stock 25 (10 WIP and 15 finished goods), turn will increase to 29.2 (= (105/25) + 25). When the turn increases over years, they will start researching the cause of this increase: do they for example store too many stock? As a result, insights in the competitiveness is gained.

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4.2 Landustrie

4.2.1. General information

Landustrie is a Dutch organization designing and manufacturing electromechanical equipment for sewage and wastewater treatment, hydropower installations, pumps and pumping stations. With 100 years of experience they produce pumps and sewage products and sell them all around the world. The organization has about 150 FTE and an annual turnover of approximately €25 million. The functions of the interviewees are head of production and product data manager.

4.2.2 Operations

Two years ago Landustrie started with the implementation of lean tools in the manufacturing process. By then, this organization was hanging by a thread and they were forced to change their way of working to stay in the market. They did not implement lean step by step or at one point in time, but they came to the belief it was needed and random started implementing changes. They increasingly learned by doing. It was a hard way according to the head of production, but they needed to change due to the big problems they encountered which threatened the company’s existence. The purpose of lean to this organization is to achieve a throughput time as low as possible. Besides, they also want to achieve a low WIP position in order to lower their costs.

4.2.2.1 Changes in operations and encountered obstacles

The different process steps to manufacture products are organized by foremen, who at their turn are supervised by chiefs reporting to the head of production. In the past, foremen were quite self-sufficient. The current head of production quoted:

“You could have compared this organization with a shopping mall. Anyone who needed something went by the shops, trying to arrange the best for themselves. One of the problems that occurred at the work floor was verbal abuse winning the gain for materials, instead of equal distribution.”

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want flow. How can we achieve that best?’ They invested for €3 million in new tools, cranes and lathes, and focused a lot on sales. The managing director and the former factory leader agreed that their current way of working was about to perish the organization down. The former factory leader changed jobs to head of production, with a focus on improving all production processes. He became a member of several networks, from which the Lean Innovation Network is one. Next to immersing himself in the world of efficient ways of working, also the chiefs and other employees received education in the philosophy of lean. By providing training sessions to the workforce on SMED, 5S and playing the same game with LEGO bricks as MSE Forks did employees learned about the lean concept by doing. Although the workforce tended to understand what the philosophy of the game was about, they were not willing to apply this philosophy to their own workplace. The old structure forced employees to build up their own way of working. Workstations were all ‘holy houses’, build by themselves without any support. ‘This way works best for me, why should I change it?’ Training to understand lean is still going. At the end of this year a member of the board of Landustrie is going to give a clinic about the necessity of lean to Landustrie in order to achieve their goals. He will do this with the use of a ‘river model’: by removing all weirs and dams the water’s flow will be a lot faster. The purpose of providing principles as flow and bottlenecks to the workforce by the board is to enhance employee involvement from a top-down perspective.

4.2.2.2 Measuring of operational KPI’s

To clarify the organization more, the head of production came up with a scheme of the factory and divided work in 4 steps: A, B, C and D. At A they receive raw materials; at B materials are converted into discrete pieces; at C work is painted and ready for the mekano department (last processing step); at D they deliver. D does not necessarily mean transferring products to the customer, it can also mean they take it back in storage. When this is the case, they mark it as a finished product. Also, they need stock because they are located in the infrastructure. When something breaks down in for example South-Africa, they need to be able to send new materials on a short-term basis. However, they are trying to decrease their stock with €1 million and so far they did not encounter trouble due to lower stock storage.

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problems according to the planning of work and therefore threatens on-time-delivery. To organize planning carefully, they color orders at the office which needs to be finished this week orange, while orders that are too late already are colored red. It is the task of both planning and executive workforce to make sure the order is processed in time.

At the warehouse all products are labeled by barcodes. By doing this, they now always know what is inside their warehouse and where it is located, to improve efficiency. In the plant, many workplaces changed location and they use blue and red cars instead of forklifts to provide the workplace with stock that needs to be processed. Every working place is provided with three cars in a blue section. Each car consists of one order. When there are two cars at the blue section, logistics need to make sure they deliver another car, so there always will be three cars that can be processed. When an order is finished, the employee moves the car to a green section, to be picked up by logistics. Since one car consists of one order of maximum 8 hours, there always will be work for at most 24 hours (= 3 working days). With this way of working, they start to work according to a technique in between push and pull production, called CONWIP. CONWIP is an alternative to KANBAN, with agreements on the amount of work in process for all process steps. As a result, they always have work available at each process step, but not all work is present at the work floor. By now they are able to assemble a pump in 1 hour, while throughput time in the past was about 8 hours.

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to prepare work for assembling products (in Dutch ‘werkvoorbereiding’) the employee uses another desk and corresponding telephone number than the day before when his task was to schedule work.

4.2.2.3 Operational and strategic decisions

Operational decisions are based on value streams instead of standard costs. The product data manager said they do this because they cannot measure standard costs properly due to the fact costs are received as commercial costs and because value streams are of greater importance to them because of a long-term focus next to short-term. An example of decisions based on value streams is an idea of an executive employee. Although executive workforce overall tends to not support lean in their own working environment, one of the executive employees did as a result of working eight weeks at the business office due to illness. After studying on a map of the factory and the route products take while being processed at the factory he found out it will be more efficient when another lathe is bought and placed more close to the other workplaces. When building aerators, this product needs to be taken two times to the other side of the plant because the lathes are located over there. When building a lathe in front of the other processes aerators go through, this will save a lot of time and proceedings. As a result, this idea contributes to the value stream and not to the standard cost approach. With this idea the employee went to the management of Landustrie and by now they think about performing his idea.

4.2.3 Internal Reporting

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To achieve their goals, all processed work is now managed by the planning. They planned their work around the aforementioned ABCD steps. Planners’ job changed to creating work order lists. When delivery time allows flexibility, workers are free to choose the order in which they process their work. If they for example need to machine (in Dutch ‘verspanen’) cast iron, followed by steal, followed by cast iron, followed by steal and so on, they are free to first machine all cast iron before cleaning the machine to start machining steal. As a result, they need to clean the machine less often and employee’s involvement will probably grow due to the flexibility he gets assigned. When the worker needs to clean the machine all the time, this will lower his motivation to work hard. On the one hand, Landustrie wants to lower production costs and work according to pull production, but on the other hand they also want to have motivated employees who work hard. As long as the worker makes sure the orders are machined before the ‘C’ date, the head of production approves this kind of worker flexibility. He said:

“It’s just like soccer, as long as the ball stays inside the lines, the referee does not blow his whistle.”

Continuous improvement has been introduced recently to this company. Every department needs to write two improvement plans each month that save each one to five hours on a yearly basis. In addition, the business office grabs a problem each month somewhere in the organization and focuses on improvements for that problem for over one month. After that month, the problem still got supervised, but not with an active focus. The purpose of this way of working is to tackle many problems at different departments. Besides, they believe that by improving a problem in the organization, responsible employees pick up the problem themselves to improve it more.

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4.3 Overview case descriptions

In order to create an overview of the results presented in section 4.1 and 4.2 and analyze them, two tables are built upon findings. Table 7 shows the process and content of the implementation of lean manufacturing and the corresponding changes in operations. Table 8 is a representation of the Lean Accounting principles structured by the three methods of Maskell and Kennedy (2007). Because the distinction between Visual Management and Value Stream Management is not clear according the tools the organizations use, these are taken together.

Lean Accounting

Organization

Aspect MSE Forks Landustrie

Process

- Implementation of lean Stepwise: 1. removing buffers; 2. aligning ‘takttijden’; 3.supply chain integration

Implementing lean tools per department.

- Purpose of lean Low throughput time, lower costs Low throughput time, low work in process, lower costs

Content

- Main changes in operations - KANBAN/two-bin system - Low stock - Task diversity - Planning (LPC) - PCF (product configurator) - SMED - Lay-out workplaces - Integration of supply chain - Preventive maintenance

- CONWIP - Low stock - No task diversity - Planning (small orders) - Mercato

- SMED

- Lay-out workplaces

- Operational decisions Value streams, long-term perspective more important than short-term perspective

Value streams, long-term perspective more important than short-term perspective, standard costing impossible

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As can be derived from the tables, the case descriptions show similarities and differences in their way of translating the principles of lean in practice. Overall, both organizations view lean as a tool to achieve their goals. At MSE Forks lean consists mainly of Flow, KANBAN, supply chain integration and JIT. To Landustrie Flow, CONWIP and JIT can be seen as the main lean tools used. All of aforementioned lean manufacturing tools are based on and found by literature

Lean Accounting

Aspect MSE Forks Landustrie

Visual Management and Value Stream Management

- Operational PI’s - Length throughput time - On-time-delivery - Hours registration: lead

time of an order, not duration of one process by one employee measured - First-time-through - Turn

- Turnover per capita per hour

- Length throughput time - On-time-delivery - Difference budgeted

hours/realized hours of work

- Financial PI’s - Revenue

- Costs of material - After-sales - Revenue - Costs of material - Operational costs/turnover

- Capacity PI’s - Occupancy rate - Occupancy rate “To achieve more with the same resources”

Continuous Improvement

- Employees can bring in ideas. 2 times a year best ideas are rewarded

- 2 plans per department per month (each 1 to 5 hours saving annually) - Business office grabs

one problem every month to improve

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(e.g. Goldratt, 1984; Kennedy & Widener, 2008) and support the five basic principles of lean found by Womack and Jones (1996). Next to optimizing the manufacturing process steps, MSE Forks had applied the lean philosophy more widely by also including the supply chain in their process of lean.

While MSE Forks immersed themselves so heavily in the philosophy of lean, they started thinking according to lean and as a result also translated their way of internal reporting. Landustrie recently realized only changing the plant is not enough to enhance organizational efficiency and started focusing on performance indicators. However, both organizations do not use literature to base reporting on. Nevertheless, there are some similarities with Maskell and Kennedy (2007): most indicators used to measure performance are also used by Box Scores. When further discussing Visual Management, MSE Forks in particular tries to report as visible as possible: most of the PI’s are printed and are shown to all employees to gain insights and clarity of results. Landustrie increasingly starts providing insights in performance. By now Landustrie for example presents on-time-delivery performances and emphasizes on late deliveries by marking these orders red in order to create awareness of overall instead of individual performances to the workforce.

According to Value Stream Management, both organizations abandoned standard costing in order to use value streams to base operational and strategic decisions on. MSE Forks and Landustrie look at the effect of overall performance when deciding to replace or expand machinery. They measure alterations of performance by looking at the throughput time and average production cost. In contrast, Landustrie does measure occupancy rates of individual processes and attaches performance to that measure. This is contrary with lean and does not contribute to value stream management.

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5. CONCLUSION, RECOMMENDATIONS, LIMITATIONS & FUTURE

RESEARCH

In the first section of this final chapter the research question is answered. The conclusion is based on the preceding literature review and empirical research. Section two presents recommendations to the case organizations in order to enhance the lean strategy by using an appropriate MAS. In addition, the limitations of this research are discussed. This thesis ends with a section providing suggestions for future research.

5.1 Conclusion

The objective of this research is to find out to what extent lean manufacturing organizations can increase the value of the lean strategy by using Lean Accounting. In order to answer the research question, this conclusion discusses what Lean Accounting actually is, the problems of a traditional MAS according to lean manufacturing organizations and the added value of Lean Accounting to lean manufacturing organizations.